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Financial Modelling Interview Questions 1719011151
Financial Modelling Interview Questions 1719011151
Yogesh Yadav
Financial
Modeling
Interview Questions
with Answers
1. What is financial modeling, and why is it
important?
Yogesh Yadav
10. Explain the concept of working capital in financial modeling?
Ans - You can adjust assumptions, cash flows, and discount rates for
inflation to create a model in real (constant) dollars or nominal
dollars.
23. How would you handle the issue of missing data in a financial
model?
Yogesh Yadav
25. Explain the concept of Earnings Before Interest and Taxes (EBIT) and
its significance.
Ans - The weighted average life is the sum of the present values of each
bond coupon and principal payment, divided by the total present value.
Ans - The equity risk premium is the expected return on stocks minus the
risk-free rate and is used to estimate the cost of equity in a DCF model.
Yogesh Yadav
31. What is the difference between a pro forma income statement
and a historical income statement?
32. How do you calculate the average collection period for accounts
receivable?
35. Explain the concept of Earnings Per Share (EPS) and its
relevance.
Ans - Operating leases are expensed over time, while capital leases are
treated as asset acquisitions and result in depreciation and interest
expenses.
42. How would you assess the credit risk of a company in financial
modeling?
44. What are the key assumptions in a DCF model, and how do you justify
them?
45. How do you calculate the terminal growth rate in a DCF model?
Yogesh Yadav
46. What is the purpose of a cash flow waterfall in project finance
modeling?
Ans - A cash flow waterfall outlines the distribution of cash flows among
various stakeholders, including lenders and equity investors, in a
structured manner.
47. How do you handle foreign exchange rate risk in financial modeling?
49. How do you calculate the Weighted Average Lease Term (WALT) for
a real estate investment?
50. Can you explain the concept of a waterfall structure in a private equity
fund?
Yogesh Yadav
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